Open Banking - Impact on Credit

Discussion in 'Loans & Mortgage Brokers' started by d_walsh, 4th Apr, 2019.

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  1. d_walsh

    d_walsh Well-Known Member

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    Attended a session recently on “Open Banking” and legislation that’s due by early next year.

    Whilst on an opt in basis, it allows financial institutions to share your data directly with other institutions, so it goes a a big step further than positive credit reporting. Banks will be able to assess expenditure and spending habits over the last 6 years so there’s potential for further changes to credit policy and availability based on this.

    Some key take aways FYI:
    1. You have to consent, although expect institutions to slip a consent form in with the abundance of other loan docs you sign.
    2. If at some stage you withdraw consent, institutions have to delete your data or make it anonymous. Exception is if they’ve used it for a credit assessment.
    3. Up to 6 years historical data available, incl transaction history for any sole or joint accounts.
    4. Will be managed by ACCC and is meant to encourage competition, especially with fintechs, although will wait to see.
    5. Can act like a tap - so if you consent your data will continue to flow unless you opt out.

    Some negatives:
    - May keep a lid on credit availability because 6 years of data will be available and it’s not clear how the banks will treat this in determining your future expenses
    - Banks will have an accurate understanding of your financial position more than ever. Any conservativeness in policies might be amplified.
    - Some risk to brokers as allows an automated assessment of borrowing capacity based on someone’s actual data and then recommendation to lenders based on that. Counter argument is the better brokers provide value outside of this i.e. help with structuring, future planning and other advice.

    Some positives:
    - Quicker turnaround times for loan applications because banks can develop systems to efficiently analyse your data (income and expenses)
    - Potentially less paperwork required to evidence income, savings history, c/c accounts etc when applying for loans
    - Apps offering centralised platform for all your accounts across different institutions, with real time assessment of spending habits, forecast cashlow etc.

    Very mixed responses to this in the session I attended. Ranged from references to George Orwell’s 1984 through to there could be some benefits.

    Keen to hear what brokers have heard and how people expect this to impact credit process and availability once introduced.
     
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  2. wylie

    wylie Moderator Staff Member

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    It sounds very "big brother" to me. I'd rather give them what they need than have them comb through my business, even if it saves a few days. And I doubt it would speed anything up anyway. I've always found brokers are efficient but they have to deal with banks, who seem not to be. The chain is only as strong as the weakest link.

    The bank you will apply for a loan with is already wanting to know what you ate last night, when you last bought take-away and when you showered. I'll give them what they ask for and no more.

    The banks (in my experience) stuff things up all the time. I'm grateful to have our loans, but the pain we go through to have them is the trade off. They cannot get many things right already. Giving them more information isn't going to help the most basic of things they get wrong, year after year.
     
    Last edited: 5th Apr, 2019
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Initially I think it will make it harder for some people to get loans. The really good risks are self evidence in the application, this sort of information really only serves to bring the skeletons out of the closet. I think initially lenders will over react to the information they'll receive. Eventually they'll rationalise some of it and overall things will remain the same. I don't see that this makes it easier for consumers by going direct, it's either the same or worse.

    I don't really see a downside for brokers in this. Brokers match the most appropriate lender to the clients circumstances. Brokers will have access to the same info the banks do so the policy matching can become more efficient and effective. Quite a few different broker software platforms are already working to integrate CCR.

    From my perspective, it would be great if all I need to do is get a name, drivers license & authorisation, then I can immediately download a clients financial profile without the need for a fact find. The data gathering stage would be one of filling in the blanks, rather than starting from scratch. It's probably a pipe dream in the short term, but that's where this is heading.

    It's also damn scary from a privacy perspective.
     
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Brave new World 1984 :)

    ta

    rolf
     
  5. Redwing

    Redwing Well-Known Member

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